The generally accepted rule of risk management in Forex trading is to risk at max 2% of trading capital per trade. Consider, for example, a student or a regular employee who need to take care of a four-member family. In such cases, it is very hard to save enough money for trading. Is it even possible to make a living with trading a small account? Let’s look at the disadvantages of trading without insufficient funding.
Pursuit of impossible results
Imagine a small trading account of 1 000 USD. When we risk 2% – 20 USD, how big profits can we expect? If we consider the 1: 1 fixed money management rule, we can expect earnings around $ 20 per trade. In order to reach the average monthly salary (1 500 USD) you need 75 profitable trades. Moreover, the profit of 1 500 USD would mean a 150 % monthly return, which is totally extreme and unsustainable in the long run. Unreasonably elevated expectations and insufficient capital bring fatal losses.
Pressure on your psyche
Poor capitalization affects the trader´s psyche negatively. If we cannot afford to put more money into trading, we are constantly trading under higher pressure. Trading under unnecessary pressure is a great drawback and all traders should avoid it.
Join us and receive funding
Trading is not just about trade. Have you tried thinking on each and every single trade? This is why we have prepared a simple trading journal for al our traders. Write down every thought you have. Take a screen-shot of your trade and try to come back to it some time later. Was the trade carried out successfully? And now we do not mean input only, but also its management.